Latest Legal News - Retention of Title Clauses and Administration (May 2011)

The Court of Appeal has held that no term will be implied in contracts for the provision of goods on retention of title terms, limiting the ability of the receiving party to deal with the good solely in the usual course of its business. Accordingly, unless there is an express provision to the contrary there is nothing preventing an administrator from dealing with goods held on such a basis.

In Sandhu (t/a Isher Fashions UK) v Jet Star Retail Ltd & Ors [2011] EWCA Civ 459 the Claimant issued a claim on the basis that the Defendant, which was in administration, had no right to deal with goods supplied to it by the Claimant on retention of title terms. The Claimant's claim was based on the argument that whilst the supply contract permitted the Defendant to deal with the goods, that permission was limited to dealings in the ordinary course of the Defendant's business, which trading in an administration fell outside of. The supply contract expressly provided that the Claimant could serve notice preventing any further dealing with the goods in the event that the Defendant entered any informal insolvency process. However, no such notice was served.

The Court of Appeal affirmed the decision of the High Court to the effect that it is within the parties' rights to include an express provision limiting the permitted uses to those in the ordinary course of the recipient's business and stated that it was of the view that in such a case trading in administration would fall outside the ordinary course of business. As such, if notice had been served by the Claimant under the relevant provision it would have been effective. However, in the absence of any express provision none would be implied.  

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